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Stereotyping and Marketing: Out-Group Homogeneity Bias and Entry to Competitive Markets

  • Neil BendleEmail author
  • Andrew Perkins
Research Article

Abstract

Marketers seeking to understand diverse customers risk using stereotypes. That market forces will deal with the problem of stereotyping may be an overly strong assumption and so we ask: (1) How might OGHB impact a marketing decision? And (2) are the effects of this likely to persist in markets, i.e., does it matter? Our research combines the psychology of prejudice with game theory to model competitive market outcomes. We model marketers relying on stereotypes—technically experiencing out-group homogeneity bias (OGHB); the tendency to perceive out-groups as less varied simply because we are unable to identify with them. Our core finding is that in competitive market entry OGHB can have negative consequences for the competitor of those experiencing the bias. This comes from a reduction in the value of the market, rather than any gains made by those employing stereotypes. Bias resembles a negative externality and non-market efforts to reduce stereotyping may be in the interests of not just consumers but also the competitors of those using stereotypes.

Keywords

Out-group homogeneity bias Market entry Behavioral game theory Strategic marketing Analytical methods 

Notes

Funding Information

The first author would like to thank the Institute for the Study of Business Markets at Penn State for the financial support of this research.

Compliance with Ethical Standards

Conflict of Interest

On behalf of all authors, the corresponding author states that there is no conflict of interest.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Ivey Business SchoolWestern UniversityLondonCanada
  2. 2.Carson College of BusinessWashington State UniversityPullmanUSA

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